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Edited Transcript of SNA earnings conference call or presentation 18-Apr-19 2:00pm GMT

Q1 2019 Snap-On Inc Earnings Call

KENOSHA Apr 22, 2019 (Thomson StreetEvents) -- Edited Transcript of Snap-On Inc earnings conference call or presentation Thursday, April 18, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Aldo J. Pagliari

Snap-on Incorporated - Senior VP of Finance & CFO

* Nicholas T. Pinchuk

Snap-on Incorporated - Chairman, CEO & President

* Sara M. Verbsky

Snap-on Incorporated - VP of IR

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Conference Call Participants

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* Bret David Jordan

Jefferies LLC, Research Division - Equity Analyst

* Christopher D. Glynn

Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst

* Curtis Smyser Nagle

BofA Merrill Lynch, Research Division - VP

* David Sutherland MacGregor

Longbow Research LLC - CEO and Senior Analyst

* Gary Frank Prestopino

Barrington Research Associates, Inc., Research Division - MD

* Ivan Philip Feinseth

Tigress Financial Partners LLC, Research Division - Director of Research

* Joseph D. Vruwink

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Associate

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Presentation

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Operator [1]

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Good day, and welcome to the Snap-on First Quarter 2019 Results Investor Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Sara Verbsky. Please go ahead.

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Sara M. Verbsky, Snap-on Incorporated - VP of IR [2]

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Thank you, Lauren, and good morning, everyone. Thank you for joining us today to review Snap-on's first quarter results, which are detailed in our press release issued earlier this morning.

We have on the call today, Nick Pinchuk, Snap-on's Chief Executive Officer; and Aldo Pagliari, Snap-on's Chief Financial Officer. Nick will kick off our call this morning with his perspective on our performance. Aldo will then provide a more detailed review of our financial results. After Nick provides some closing thoughts, we'll take your questions.

As usual, we have provided slides to supplement our discussion. These slides can be accessed under the Downloads tab in the webcast viewer as well as on our website, snapon.com, under the Investors section. These slides will be archived on our website along with the transcript of today's call.

Any statements made during this call relative to management's expectations, estimates or beliefs, or otherwise state management's or the company's outlook, plans or projections, are forward-looking statements, and actual results may differ materially from those made in such statements. Additional information and the factors that could cause our results to differ materially from those in the forward-looking statements are contained in our SEC filings.

Finally, this presentation includes non-GAAP measures of financial performance, which are not meant to be considered in isolation or as a substitute for their GAAP counterparts. Additional information including a reconciliation of non-GAAP measures is included in our earnings release and in our conference call slides on Pages 14 through 17. Both can be found on our website.

With that said, I'd now like to turn the call over to Nick Pinchuk. Nick?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [3]

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Thanks, Sara. Good morning, everybody. As usual, well, I'll start the call by covering the highlights of our quarter, and along the way, I'll give you my perspective on our results, on our markets, on the progress we've made and what we believe it all means. Then Aldo will move into a more detailed review of the financials.

Once again, the results for the quarter in the comparative period include a number of special, nonrecurring legal tax and debt events that affected our as-reported levels. So to provide greater clarity, we'll refer to amounts excluding the onetime effects as an as-adjusted number to make everything comparable.

And when you look through all of it, we believe it's clear that Snap-on did make recognizable progress, demonstrating again our ability to continue a trajectory of positive results, recovering in some important areas while overcoming some significant challenges. We're encouraged by the quarter.

The Tools Group U.S. van network, which has been the center of some considerable attention, continue its improvement, growing mid-single digits on fairly broad improvement. RS&I saw some rise in its business serving the vehicle OEMs that have been down for several quarters, and the corporation's efforts around Snap-on Value Creations, our runways for improvement, fought off the challenges of unfavorable currency and uncertain environments in some of our geographies to maintain and expand our profit margins.

Now the results. First quarter as-reported sales were $921.7 million, down 1.5%, including a $26.1 million or 290 basis point impact from unfavorable currency. Organic sales were up 1.4%, gains in the U.S. van channel in critical industries tempered by the turbulence.

From an earnings perspective, our opco operating income for the quarter, including the onetime benefit from a recent legal settlement and an offsetting impact of unfavorable currency, was $187.4 million, increasing 5.5% compared to last year.

OI margin for the quarter was 20.3%, rising 130 basis points. On an as-adjusted basis, excluding the nonrecurring items, the OI margin was 19.1%, up 10 basis points. For financial services, operating income of $62.1 million was up compared to last year's $56.9 million. And the as-reported OI margin, including both financial services of opco, was 24.8%, up 180 basis points. The as-adjusted OI margin was 23.6% compared to the as-adjusted 23% of last year.

In EPS on an as-reported basis was $3.16, $0.34 or 12.1% above last year. The as-adjusted EPS was $3.01, exceeding the comparable $2.79 from last year by $0.22, an apples-to-apples increase of 7.9%.

Now let's look to our markets. We believe the auto repair market remains a great place to be despite the variations. The aging of the car park, the changing of repair tests as new vehicles introduce, the increasing vehicle complexity are solid underlying drivers that we continue to see across the segment.

Now we do see headwinds arise from time to time, associated with macro difficulties in certain geographies like the U.K. and in certain sectors like the OEM dealerships where the new car industry sees turbulence. We are, however, convinced that the outlook is positive, and we keep investing, investing in product, in hardware and software, in data and processes all to further our advantages. You can see some of that confidence coming to fruition with the recovery in the U.S. van channel driven by great new products. And with the turn in the OEM business in RS&I, we believe the auto repair industry is a great place to be, and we're confident regarding our current position and our future.

In other opportunities, the market we've termed the critical industries, sectors like natural resources, the military and aviation. We see our business growing stronger in that arena with new products and new customers. We also see period-to-period challenges. But overall, we believe we're becoming more effective in those large vertical markets with stronger products like automatic tool controls, sophisticated torque system and test targeted hand tools, and we're winning a growing array of committed customers.

So overall, I describe our markets as continuing to offer attractive opportunity. We've also enabled our Snap-on Value Creation processes, safety, quality, customer connection, innovation and Rapid Continuous Improvement, or RCI, processes along which we're committed to drive improvement. They support our advantage -- our advancement in positive times, and they create powerful offsets in turbulent times. We believe you can see that in our results over time, and you can see it in the first quarter. Snap-on Value Creation overcoming challenges and continuing our performance progress.

Now let's move to the groups. In the C&I group, organic sales were up 4.7% or 1 point -- oh $4.7 million or 1.5%. Now including $13.8 million of unfavorable foreign currency, first quarter as-reported volume declined $9.1 million.

From an earnings perspective, C&I operating income was $46.5 million, about the same as last year. The operating margin was up 40 basis points to 14.4%. Organic volume, RCI and the effect of foreign currency drove that rise.

We've been speaking for some time about the importance of our torque product line. The robust performance in our specialty torque division was particularly encouraging with a high single-digit increase this quarter. And beyond that, growth in the critical industries was evident in the quarter. Both those gains were partially occluded or partially attenuated by spotty performance in some of our international markets.

Now critical industries show variations across the businesses, up for natural resources, the military, education and general industry partially offset by some softness in aerospace, but overall, showed a positive outlook. We're confident in and committed to extending in the critical industries, and we have seen continuing gains, now 10 straight quarters of growth, authored by a strengthening lineup of innovative product matched to the task and designed especially to make work easier in the uniquely challenging industrial workspace.

And our torque lineup is an example of that expanding strength. As a matter of fact, torque and critical industries are natural partners, and we've been investing to pursue the possibilities. A great example just introduced is Snap-on's ControlTech, CTech, Micro Torque Wrench fitted with Bluetooth low-energy technology, BLE technology, an offering created by customer connection and innovation. Our traditional Snap-on specialty is torque in a compact body, and we combined that strength with our recent acquisitions, Sturtevant Richmont's expertise in wireless torque programming and documentation. It all came together to make critically work much easier, much more productive in this -- with this extraordinary product. The Sturtevant Richmont BLE system enables remote programming to match in order the varying torque values required to complete many essential tasks in aerospace, the military or oil and gas. And the remote communication model that does that seamlessly packages inside the Micro Torque Wrench, the micro wrench body, making the wrench able to operate in almost any space, including those very tight -- around those very tight in-line fasteners that are so common in aerospace solutions. The ability to program, and the ability to program a range of torque values in order, and the ease of access means that the micro CTech BLE does the work of 4 to 5 mechanical preset wrenches, a significant cost reduction and a clear gain in efficiency. And beyond that advantage, the BLE micro documents the actual torque supply, avoiding the need for multiple torque audits in critical applications, saving even more time. The BLE micro control tech guided by customer connection with the aircraft industry enabled by the capabilities across the Snap-on division has been received with excitements, and it demonstrates the way our product line is expanding to solve the most critical of tasks. C&I, driven forward with customer connection and innovation. And it's working.

Now onto the Tools Group. Organic sales up 2.9%, a mid-single-digit increase in the U.S., a return to the target growth range, and as a partial offset, a low single-digit decline internationally in places like the U.K.

The operating earnings, $67.2 million, down $1.7 million, including $3.1 million of unfavorable currency. That represents a margin rate of 16.4%, lower by 60 basis points, but driven mostly with 50 basis points of currency headwinds. So the Tools Group, another quarter of expanding sales in the U.S. and sales advancement overall with solid operating margins. We believe our van network remains quite strong, and it's evident when we meet franchisees, as I did with a group of them just this last weekend at the U.S. Franchisee Advisory Council, or when I meet with them individually as I also did last week. Once again, they uniformly expressed confidence in the strength of the business, displayed excitement about our products and declared optimism for their future trajectory. I tell you, you can't help but leave these encounters energized. It convinces us how strong these businesses are.

The van network has seen some variation though, but we are quite confident of the opportunities. And the Tools team continues to work with focus and urgency across this geography to drive the upward trajectory of programs and promotions with great new products. When we speak of products, we turn to Snap-on Value Creation, customer connection and innovation, creating new offerings, solving critical tasks, and we're doing just that in the Tools Group. For example, last year we released a innovative new socket line, the Flank Drive Extra. We call it the FDX. It improved turning power. It has improved turning power, better fastener engagement and greater strength. It's a patented design that grips the fastener further off the corner with a more angled socket wall for greater turning power. That's where it gets its greater turning power; 20% more in nominal situations and 50% more when applied to worn or damaged fasteners, the real problematic difficulty in repair. It exceeds the power of already industry-leading standard sockets.

Now we believe we already have by far the best range of hand tools. The FDX makes it better, and the technicians agree. Hand tool sales are up nicely, demonstrating our product strength and contributing to the Tools Group's rising trajectory.

Now let's talk about another category, tool storage, also up in the quarter, helped in part by our new heavy duty mobile workbench, capable of supporting up to 2,000 pounds, 1,300 on the bench top and 700 on the lower shelf. The new bench has adjustable legs, allowing technicians to adjust the work stations to match the work -- to customize the work surface just how they like it from 30 inches to 40 inches high. It's ergonomic, healthy and safe. It also includes several storage solutions, optional drawers and various configurations allowing the techs to store those very valuable tools, those jewels, with security, and it has special side panels with 22 accessories for accommodating frequently used, bulky or messy units. Snap-on -- the Snap-on heavy-duty bench has strength, durability, friendly ergonomics and flexibility all in one product, and it's well on its way to achieving a hit million-dollar product status, and we believe it has much more runway. Well, that's the Tools Group, improving growth, continuing profitability underpinned by strong product.

Now let's speak of RS&I. First quarter organic sales declined 0.5%, close to flat, reflecting a low single-digit increase in our undercar equipment operation, partially offset by low single-digit growth on our businesses focused on OEM dealers. RS&I operating earnings of $83.6 million decreased $2.2 million including 1.5 from unfavorable -- $1.5 million from unfavorable currency. Operating margin was robust, 25.5%, flat despite the lower volume.

Now the OEM-facing businesses did advance, a recovery after several quarters of downturn. We said that the pullback will be a temporary phenomenon, and in fact, it was. That area has now improved. Having said that, we continue to clearly see abundant runways for growth in the RS&I group, and we're working to take advantage of those opportunities again with new products like our recently introduced school bus diagnostic kit. The school bus package provides the repair technician with a guide to standard preventive maintenance procedures and offers quick capabilities for analyzing vehicle performance, problems for that special application. The new kit, it features our NEXIQ pocket HD heavy-duty handheld unit, unique diagnostics software and a full array of cables and accessories. School bus repair is a clearly -- is clearly a critical pass, and our new kit makes that effort more effective and easier.

Also in the first quarter, we entered the motorcycle diagnostic market with our new p1000 handheld. Based on customer connection, the new system fills an underserved need for an all makes, all model motorcycle diagnostic solution. Based on our customer connection, we knew it would be well received, and that's just what happened. We're confident in the strength of our RS&I product line, and that possibility is not just from our internal views or internal measures.

Recently, we're again acknowledged by Undercar Digest magazine with that publication's naming 4 of our new products to its 2019 List of the top 10 tools: 2 Mitchell1 repair products, our ProDemand Repair Information System and our manager [FC] Shop Management suite were selected; and 2 diagnostic products, our groundbreaking Apollo handheld with intelligent diagnostics, and our Thermal Imager Elite were also recognized in the top 10. Four in the top 10. And the Undercar Digest awards are selected by readers, shop owners and technicians, people who earn their living by being accurate and efficient when diagnosing and repairing today's vehicles. It's clear that these awards are independent verification of Snap-on's ongoing commitment to customer connection and innovation, but most of all, to the extraordinary result of that focus. We keep driving to expand RS&I's position with repair shop owners and managers, making work easier with great new products, developed internally with Snap-on Value Creation or added by our strategic and coherent acquisitions, and we're confident it's a winning approach.

So those are the highlights of our quarter, continued progress, sales growth and profitability gains, overcoming headwinds, RS&I group challenge, but seeing some recovery in the OEM-facing business, strength in the U.S. van channel and further progress in the critical industries. Snap-on Value Creation driving a wide array of new products, broad array of new products as I've demonstrated here, and improved processes more than offsetting the turbulence, authoring an as-adjusted 19.1% opco operating margin, up 10 basis points and driving an as-adjusted $3.01 EPS, up 7.9%. It was an encouraging quarter.

Now I'll turn the call over to Aldo. Aldo?

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Aldo J. Pagliari, Snap-on Incorporated - Senior VP of Finance & CFO [4]

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Thanks, Nick. Our consolidated operating results are summarized on Slide 6. Net sales of $921.7 million in the quarter were down 1.5%, reflecting a 1.4% organic sales gain and $26.1 million of unfavorable foreign currency translation. The organic sales gain this quarter principally reflected mid-single-digit growth in the U.S. franchise operations of the Snap-on Tools Group and low single-digit growth in the Commercial & Industrial segment.

Consolidated gross margin of 51.2% improved 80 basis points primarily due to the higher organic sales, savings from RCI initiatives and 10 basis points of favorable foreign currency effects.

Operating expenses of $284.2 million benefited from the $11.6 million legal settlement Nick mentioned earlier. The operating expense margin of 30.9% improved 50 basis points as the 120 basis point benefit from the legal settlement was partially offset by 20 basis points of unfavorable foreign currency effects and higher cost.

Operating earnings before financial services of $187.4 million or 20.3% of sales included $5.7 million of unfavorable foreign currency effects and the benefit of $11.6 million from the legal settlement. Excluding the legal settlement, our operating earnings before financial services as adjusted was $175.8 million or 19.1% of sales compared to $177.7 million or 19.0% of sales last year.

Financial services revenue of $85.6 million and operating earnings of $62.1 million increased 3.1% and 9.1%, respectively, from 2018, reflecting continued growth in our financial services portfolio as well as improved bad debt and delinquency performance.

Consolidated operating earnings of $249.5 million or 24.8% of revenues included $6.2 million of unfavorable foreign currency effects and the legal settlement. Excluding the legal settlement, our operating earnings as adjusted was $237.9 million or 23.6% of revenues compared to $234.6 million or 23% of revenues a year ago. Our first quarter effective income tax rate of 24.3% including an increase of 10 basis points related to the legal settlement compared to 26.2% last year. Our Q1 2018 rate included 120 basis points related to the implementation of tax legislation in the United States. And excluding the tax charge, the effective tax rate in the first quarter of 2018 as adjusted was 25.0%.

Finally, net earnings on a reported basis of $177.9 million or $3.16 per share, including an $0.08 unfavorable impact associated with foreign currency compared to $163.0 million or $2.82 per share a year ago. Excluding $0.15 per share for the legal settlement, adjusted earnings per share was $3.01, up 7.9% compared to Q1 2018; adjusted earnings per share of $2.79, which excluded net debt items and tax charges last year.

Now let's turn to our segment results. Starting with the C&I group on Slide 7. Sales of $322.5 million in the quarter decreased 2.7%, reflecting a 1.5% organic sales gain more than offset by $13.8 million of unfavorable foreign currency translation. The organic growth included a high single-digit increase in sales in our specialty tools business as well as low single-digit gains with customers in critical industries. These increases were partially offset by a low single-digit decline in the segment's Asia Pacific operations as well as lower sales in some of C&I's Latin American markets such as Mexico, Argentina and Chile.

Gross margin of 40.4% improved 140 basis points year-over-year primarily due to the higher organic sales volumes, savings from RCI initiatives and 40 basis points of favorable foreign currency effects. The operating expense margin of 26% increased 100 basis points primarily due to 10 basis points of unfavorable foreign currency and higher sales related to spending and other cost. Operating earnings for the C&I segment of $46.5 million were unchanged from last year while the operating margin of 14.4% increased 40 basis points from 14% in 2018.

Turning now to Slide 8. Sales of Snap-on Tools Group of $410.2 million increased 1.4%, reflecting a 2.9% organic sales increase partially offset by $6.2 million of unfavorable foreign currency translation. The organic sales gain includes a mid-single-digit increase in United States partially offset by a low single-digit decline internationally. The sales increase in the U.S. reflected stronger sales of hand tools, tool storage and diagnostic products.

Gross margin of 44.6% included 40 basis points of unfavorable foreign currency effects, remained unchanged from last year. The operating expense margin of 28.2% increased from 27.6% last year primarily due to 10 basis points of unfavorable foreign currency effects and higher other cost.

Operating earnings for the Snap-on Tools Group of $67.2 million included $3.1 million of unfavorable foreign currency effects, decreased $1.7 million from last year, while the operating margin of 16.4% including 50 basis points of unfavorable foreign currency effects compared to 17% in 2018.

Turning to the RS&I Group shown on Slide 9. Sales of $327.9 million decreased 2.7% reflecting a 0.5% organic sales decline and $7.6 million of unfavorable foreign currency translation. The lower organic sales reflect a low single-digit decline in sales of undercar equipment partially offset by a low single-digit increase in sales to OEM dealerships. Weakness in Europe impacted RS&I's overall sales growth in the quarter.

Gross margin of 48.2% increased 10 basis points from 48.1% last year. The operating expense margin of 22.7% compared to 22.6% a year ago. Operating earnings for the RS&I group of $83.6 million decreased $2.2 million from prior year levels, while the operating margin of 25.5% was unchanged from last year.

Now turning to Slide 10. Operating earnings from financial services of $62.1 million and revenue of $85.6 million increased 9.1% and 3.1%, respectively, from a year ago. Financial services expenses of $23.5 million decreased $2.6 million primarily due to lower provisions for credit losses. As a percentage of the average portfolio, financial services expenses were 1.1% in the first quarter of 2019 and 1.3% in the first quarter of 2018. The average yield on finance receivables in the first quarter was 17.8% for both 2019 and 2018. Respective average yield on contract receivables was 9.1% and 9.2%.

Total loan originations of $252.5 million increased $5.2 million or 2.1% primarily due to a 2.4% increase in the originations of finance receivables.

Moving to Slide 11. Our quarter-end balance sheet includes approximately $2.1 billion of gross financing receivables including $1.8 billion from our U.S. operation. Our worldwide gross financial services portfolio grew $4.1 million in the first quarter. The 60-day-plus delinquency rate of 1.5% for U.S. extended credit improved 10 basis points year-over-year and also reflects the seasonal improvement we typically experience in the first quarter. As it relates to extended credit for finance receivables, the largest portion of the portfolio, trailing 12-month losses of $51.4 million represented 3.09% of outstandings at quarter end. That's down 7 basis point sequentially, supporting continued stabilization of the portfolio's credit metric performance.

Now turning to Slide 12. Cash provided by operating activities of $201.3 million in the quarter decreased $30.6 million from comparable 2018 levels primarily reflecting net changes in operating assets and liabilities, including the $11.6 million reduction in liability related to the quarter's legal settlement partially offset by higher net earnings.

Net cash used by investing activities of $38.7 million included net additions to finance receivables of $18.6 million and capital expenditures of $20.2 million. Net cash used by financing activities of $147.6 million included cash dividends of $52.8 million and the repurchase of 295,000 shares of common stock for $47.4 million under our existing share repurchase programs. As of the end of March, we had remaining availability to repurchase up to an additional $476.9 million of common stock under existing authorizations.

Turning to Slide 13. Trade and other accounts receivable decreased $17.3 million from 2018 year-end, including $1.6 million of favorable currency translation. Days sales outstanding of 65 days compared to 67 days at 2018 year-end. Inventories increased to $33.2 million including $1.5 million of favorable foreign currency from 2018 year-end. On a trailing 12-month basis, inventory turns of 2.7 compared to 2.9x at year-end 2018.

Our quarter end cash position of $156.4 million increased $15.5 million from 2018 year-end levels. Our net debt-to-capital ratio decreased to 22.6% from 24.2% at year-end 2018.

In addition to cash and expected cash flow from operations, we have more than $700 million in available credit facilities. As of quarter end, we had $131.5 million of commercial paper borrowings outstanding, a reduction of $45.6 million since year-end 2018.

That concludes my remarks on our first quarter performance. I'll now turn the call back over to Nick for his closing thoughts. Nick?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [5]

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Thanks, Aldo. Let me sum up. Snap-on first quarter, a step forward. Advancements in several important sectors, the continuing strength of Snap-on Value Creation overcoming the challenges and driving improvements in overall earnings and margins. We continue to be confident in the vehicle repair market, growth in the technician base, the aging of the car part, the ongoing changes from model to model, the increasing complexity of repair, the rising need for diagnostic aids and greater repair data. These are continuing and favorable trends that offer substantial opportunity, and we believe we're in the best position to take advantage. We saw some confirmation of those possibilities play out in the quarter. Significant progress in the U.S. van channel, up by mid-single digits, a return to its target range and recording its third straight positive quarter, and our vehicle OEM business has returned to growth after 3 down quarters. Of course, there were challenges in the quarter that did partially mask the progress: unfavorable currency, the largest impact we've seen for some time; spotty markets driven by the macro environment in places like the U.K., France, Mexico and other parts of Latin America. But despite those challenges, we prevailed. The Snap-on Value Creation processes is driving attractive and profitable new products and authoring a range of process improvements that overcame the difficulties and authored an opco OI margin of 19.1%, up 10 basis points and an as adjusted EPS of $3.01, up $0.22 or 7.9% despite the challenges.

It was an encouraging quarter, which we believe points to abundant opportunities and confirms that Snap-on has the position, the capabilities, the products, the market and the markets to continue our positive trend through the rest of 2018 and beyond -- 2019 and beyond.

Before I turn the call over to the operator, I'll speak directly to our franchisees and associates. Our first quarter results, our positive trend of performance and our significant opportunities going forward would not be possible without your extraordinary contribution. For your success in driving our progress, you have my congratulation. And for your continuing dedication to our team, you have my thanks.

Now I'll turn the call over to the operator. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll take our first question from Gary Prestopino with Barrington Research.

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Gary Frank Prestopino, Barrington Research Associates, Inc., Research Division - MD [2]

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A couple of questions, just real quickly. Aldo, that benefit on the patent litigation, that has -- that was a U.S.-based issue. There's no FX impact to that either way, right?

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Aldo J. Pagliari, Snap-on Incorporated - Senior VP of Finance & CFO [3]

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That's correct, Gary.

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Gary Frank Prestopino, Barrington Research Associates, Inc., Research Division - MD [4]

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Okay. Nick, could you maybe -- in terms of the tool storage, and I'm not looking for an exact number, but did you see both the year-over-year and sequential increase in the tool storage product sales in the quarter?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [5]

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Yes. Well, year-over-year was up. I think the first quarter is always a little weaker than the fourth quarter in most situations, so I don't think it's a comparable thing. We're pretty encouraged by it though. And I think more than that, I'm encouraged by hearing the way the franchisees are reacting to our product. I spent a whole day with our initial Franchisee Advisory Council over the weekend, and they couldn't say enough about it with some of our new colors and wraps and so on and some of the new products that benched. We launched the 1422. We started out calling it the [AON] -- the IQON, but that had to do with the special surface. And this takes advantage of that, only it's kind of a much more versatile thing. And that's just an example of the kind of cool things that our guys are bringing out, and they're driving tool storage volume.

Now of course, again, you have to keep earning your -- earning their confidence and earning their excitement, but we feel pretty good.

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Gary Frank Prestopino, Barrington Research Associates, Inc., Research Division - MD [6]

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Okay. And then you said the dealership business bounced back, and you feel pretty good about it. That tends to be lumpy. I mean what gives you the confidence and the visibility there at least for 2019?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [7]

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I'm seeing new products and new technologies roll out, and I think this is just me talking in terms of my opinion, but I think having worked in the auto industry, what happens is when they behold an auto industry, it turns down like a NADA and I think IHI predicted downturns in the new car sales. They tend to think about it for a little while. I think they tend to understand -- try to understand where they're going to put their money. And so from time to time, it does put a freeze on our projects, not to mention they've matched technology and so on. And I think after a while, they realize how lucrative the aftermarket is with parts and services, so they start investing again. And I think that's what we're seeing. Plus we're seeing programs come out. We can see the programs rise. So we feel okay about that although we don't give guidance or anything, but I feel kind of positive, and we said it was going to come back.

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Gary Frank Prestopino, Barrington Research Associates, Inc., Research Division - MD [8]

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Okay. And then lastly, given the technological complexity of vehicles and all. I mean are you -- you're kind of looking at your business, again I don't want specific numbers, but do you guys look at it as a mandate of that? If we got 70 new products out that hit the $1 million sales mark in 2018, the goal is to increase that every year, every year, every year?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [9]

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Yes, but I don't like the -- I haven't given out the number because I don't want to nail myself to the cross of that thing. In other words, I don't want to be reporting on it, but generally, we want to launch more of those, and we have. In fact, I'll give you a note that last year, I think, we launched 6 or 7x more new products than -- 5 -- about 6.5x or 6 to 7x more new products than we had launched in 2006, so about 10, 11 years ago. So it's been quite new hit products, new hit products, million-dollar products. So we have been driving it upwards, and it's kind of one of our metrics that we follow here. Although if it went down 1 year, I wouldn't be slitting my wrists or anything or really wringing my hands. But on the other hand, we'd like to see it goes upward. And we're also expanding our product line, not million-dollar products, but the products that address different customers in critical industries. So last year, we introduced 5,242 new products in that area just because we have a whole range of those vertical industries, and we want to adapt to particular demands, particular applications. So that's what's driving our business, new product. And the range of it is what I tried to say -- tried to give a feeling for in my presentation.

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Operator [10]

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We'll take our next question from Bret Jordan with Jefferies.

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Bret David Jordan, Jefferies LLC, Research Division - Equity Analyst [11]

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Can you talk a little bit more about the diagnostics products through the tool vans? I mean maybe give us some -- I think you mentioned Apollo being particularly strong, but maybe give us an update as to where ZEUS is. And then my follow-up question for Aldo...

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [12]

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(inaudible)

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Bret David Jordan, Jefferies LLC, Research Division - Equity Analyst [13]

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Sorry, go ahead.

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [14]

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Okay. No, go head.

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Bret David Jordan, Jefferies LLC, Research Division - Equity Analyst [15]

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Again, a follow-up question for Aldo really on a housekeeping. Just corporate expense, how should we be thinking about that on sort of an annual run rate? The last year or so we've had some puts and takes as far as legal income or loss. I guess what do we think about the core of corporate expense spending level?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [16]

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Go ahead, Aldo.

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Aldo J. Pagliari, Snap-on Incorporated - Senior VP of Finance & CFO [17]

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First, I'll let Nick dive into diagnostics. Corporate expense clearly benefited mostly this quarter by the $11.6 million reduction in our liability under the legal matter, but also it benefited in the quarter from about $1.6 million to $2 million or so pension-related expenses, which now fall below the line of the new accounting standards. So pension expense should continue on moving forward. However, in the middle of the year, you typically get a true-up of your census data, find out how people are living, things of that nature. So long answer to your question, Bret, I'd still say it's in the $90 million range, $92 million range on an annual basis. And again, you can get puts or takes on that depending on what level of spending might be around due diligence if you're looking at acquisitions or what the actual health care cost of the company come in at, that's what creates some noise around the fringes.

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [18]

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Okay. All right. Look, in diagnostics, diagnostics was up in the Tools Group fairly -- the Tools Group was kind of a good quarter we thought. I mean you would say we would say it was a good quarter, but it was kind of broad advancement, so diagnostics was up positively. The p1000 was -- the motorcycle diagnostics was a good one, but others sold reasonably well. I didn't say the Apollo was up gangbusters or anything like that. I just referred to Apollo as recognized by Undercar Digest. So I don't really want to get into what sold and what didn't sold because you can drive yourself crazy trying to analyze the ups and downs of different diagnostics in the quarter, different diagnostics. So for any different product line in the quarter, we find that not to be a very productive exercise because it depends generally on what people have on the van and how people are -- how we promote them, how they focus on selling and what captures their attention, and that changes from quarter-to-quarter. But I think it's fair to say that it was a fairly robust, I think I could say fairly robust quarter in diagnostics in Tools Group.

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Operator [19]

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We'll take our next question from David MacGregor with Longbow Research.

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David Sutherland MacGregor, Longbow Research LLC - CEO and Senior Analyst [20]

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Congratulations on a good quarter.

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [21]

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Thank you.

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David Sutherland MacGregor, Longbow Research LLC - CEO and Senior Analyst [22]

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Just could you start off by just talking, Nick, about the regional kickoffs? And how did orders compare year-over-year?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [23]

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I think orders were above -- I guess it varied from place to place, so there's quite a bit of variation this year from place to place. I think it wasn't anything special, I would say. But we've learned -- David, what we've learned about this is that I think as you -- I don't know, we've learned it. We've known it all along. I think we've kind of tried to articulate this. Whether you're talking about the SFC or whether you're talking about the kickoffs, they are only 1 component of the forward action. The biggest thing that happens in the kickoffs, of course, having more orders is better than -- having more orders than -- really robust order's better than a poke in the eye with a sharp stick, but it doesn't deliver the quarter. And so we had a good kickoff season, but I wouldn't call it really gangbusters. On the other hand, the follow-ons were very strong as well, so I think it's useful to look at it, but it isn't definitive even for the immediate quarter. We felt good about it. I particularly felt good about the training that occurred and some of the coaching that occurred in those situations because our product line is only getting more complicated. It's more powerful, and it's generating great margins as you can see on our product lines.

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David Sutherland MacGregor, Longbow Research LLC - CEO and Senior Analyst [24]

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Okay. How would you say promotional activity, the kickoffs, compared year-over-year?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [25]

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I think about the same. One of the great things I heard, and I've heard a lot of things. One of the great things, I was with the franchisees this weekend, like I said, last week, and one of the great things, music to my ears, they said, "You're giving us the best values we ever had." That's what I want them to say. By the way, our margins, overall for the corporation, 51.2% -- gross margin, I'm talking about. I don't like to talk about gross margin but in this instance, I will. 51.2% against currency was the highest in 20 years.

The Tools Group, the Tools Group, [26] -- around the height of 20 years, but the thing is very good. And the Tools Group was very robust and that was against 40 basis points of currency. So I love people saying, "You gave us great value." And by the way, that great value translated into good margins for us.

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David Sutherland MacGregor, Longbow Research LLC - CEO and Senior Analyst [26]

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Right? Well, Nick, maybe my next question, you could open the Tools Group gross margins up for a little bit like you did last quarter. And I think last quarter, you talked about negative [FX], you had some raw material issues, there were some negative FX, some RCI. Can you just open that up? It was a little bit stronger than we expected and I'd love to understand just the puts and takes...

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [27]

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New product. New product. New product drives a lot of that. That's one of the things. And our guys' programs are very creative and they impel selling and they attract franchisees even if it's not new products. So that's part of the magic of the magician doing it. But coming back to your question, we had about, I think, in gross margin, we had about 40 basis points of bad news in currency. And then there we had a slug. I don't want to really get into material costs and tariffs and all that stuff, there's a lot of turbulence. And we're not as vulnerable as a lot of people but we have impact. Everybody knows what's happened with material cost. It's gone up. We usually -- we offset them. So in this quarter, the tools gross margin is a great example.

Look, you've got currency. You've got turbulence in the supply chain. You have some impact in tariffs, which we worked through, and yet, we kept it flat. We had all those running through our overall P&L, and we shook them off, plus big currency. So I'm pretty happy about Snap-on Value Creation this quarter. (inaudible)

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David Sutherland MacGregor, Longbow Research LLC - CEO and Senior Analyst [28]

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Was there much change in the international gross margins?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [29]

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I think there was. I think in general, as you might think, in the U.K., U.K. has been struggling a little bit so we tend to want to try to get that started back on the train. And so anybody who's running a business like that, that's in that kind of turbulence really tries to push around in terms of maybe making some concessions and so on. So I don't think the international gross margins were as robust as the U.S. for sure and reflects the idea that the sales were down. And that's what those guys do. That's what we asked them to do, get the train started again, and then we worry about getting our money after that train starts.

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David Sutherland MacGregor, Longbow Research LLC - CEO and Senior Analyst [30]

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Last question for me is just the originations are up 2.4%, I guess, on the finance receivables subset. Is it possible that -- you talked about strength in storage and diagnostics and the tools segment, but is it possible your ASPs were down? Units were up, ASPs were down or at least were muted? I'm trying to reconcile the 2% with kind of the commentary that big tickets...

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [31]

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I'll let Aldo talk in a minute, but I got to say this. First of all, there isn't a temporal connection between the originations in 1 quarter and the selling. Of course, because there's time differences and so on, there's a lot of things that flow through this. So it's not a productive -- I don't think it's very easy even by us to be able to necessarily tie those 2 together very directly. You have to look over a march of time and look for -- because I guess the best way to say it is for connection between sales of new products, sales of products and originations, a quarter isn't necessarily a significant time period.

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Aldo J. Pagliari, Snap-on Incorporated - Senior VP of Finance & CFO [32]

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And actually I agree with that, David. It's just a matter of timing more than anything else. So the other slight difference is to make your modeling more difficult. You have to remember the [EC] originations where we report that as not currency affected. So you look at the currency variations and create some noise as well, but mostly it's timing.

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David Sutherland MacGregor, Longbow Research LLC - CEO and Senior Analyst [33]

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So what would the timing influence have been on that 2% number?

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Aldo J. Pagliari, Snap-on Incorporated - Senior VP of Finance & CFO [34]

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Well, we'll wait and see. We'll see what Q2 has to portray. Depends on what the franchisees do with selling off what they bought in Q1, doesn't it?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [35]

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Yes.

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Operator [36]

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And we'll take our next question from Christopher Glynn with Oppenheimer.

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Christopher D. Glynn, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [37]

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So just a question about C&I. It's always a little bit lumpy. You get strong quarters, some softer quarters. Just wondering if you see the backdrop to support the kind of mid-single-digit performance you expect over the long term in the ensuing periods. And in particular, what might be moving around with the APAC and the critical industries?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [38]

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Yes. Look, I think you can argue critical industries, this quarter, we had a couple -- we've gotten a couple of big government jobs, big defense systems that are military jobs that are good for us. The idea that government will go on crossing the Ts and dotting the Is and getting all that stuff out, we're confident we're going to have those, but they were delayed out of the quarter and that kind of what created a attenuation of some significance for the C&I group. And then there's a few markets which gives them some problems, particularly -- that gave them some problems this time. They sell into Latin America. They had some problems in there, some weakness in those markets. Mexico tends to be a bigger market for them in this situation. And so they had those kinds of difficulties. If you talk about Asia Pacific, China, I guess we have good news on China. China was particularly down, but India was really encouraging. So I think we're looking for -- we're starting to think that China and India are horns on the same goat. Everybody starts to think that China is the big kahuna and everything. Well, India is starting to come up for us. We're starting to get big [shells]. We're making increases in leaps and bounds in that environment, and we don't see it attenuating. So I'm reasonably encouraged.

Now of course, I'm probably going to kick myself for saying this, but C&I is one of the most international businesses and there are turbulences around the world. You don't have to look at Europe too hard to see Germany wondering what's happening to the industry there. You see the U.K. and so on. So you see some ups and downs, but C&I did okay in those markets. They had problems in the peripheral markets like Mexico and Latin America and the Middle East and so on. I don't think that's going to last.

I feel pretty -- just let me add. The reason it is, is that I feel pretty positive about our product. Now for example, Asia Pacific is starting to sell to people like COMAC with the ATC. The ATC is starting to become the tool storage, foreign object, damaged product of choice in Asia. If that takes off, it's good for us. So I feel good about those things.

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Christopher D. Glynn, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [39]

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Okay. And then for the SOT margin, some apparently nice mix recovery from the fourth quarter. You talked about new products in particular hitting, and you had some discounting, I think, to end the year last year. So just -- I'm wondering if we should expect the mixed dynamics and discounting to flop around a little bit. Or if the first quarter is really a lot more representative than the fourth?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [40]

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Yes. Look, I think what happened in the fourth quarter was more like we wanted to focus on customers. I think what we said was in diagnostics, we wanted to focus on customers that weren't that interested in software. So we energized around the last generation products, the SOLUS and the MODIS. And then sold those. And of course, they were last generation so they tended to be less margins than other things. We -- that would be -- what happened in the fourth quarter. We're pivoting away with that -- away from that now, and we're making some adjustments in our new generation product lines to appeal to people who are less enthusiastic about software and still we're able to sell it to them. So I don't think that's going to repeat itself, although Murphy's Law being what it is, and I don't think by intent that will repeat itself. I don't see us going there by intent. I feel pretty good about the Tools Group margin.

Now currency has got to continue. I mean what we see is that currency was pretty big this quarter. I think $6.2 million, $0.08, we see -- if everything stays the way it is now, we see next quarter is kind of the same thing. Starts to get better in the third quarter and kind of flattens out in the fourth quarter. But we're going to see currency headwinds in the Tools Group in particular in the quarter, so we won't get rid of that. That's the thing. But I still feel pretty good about the margins. I think -- when I talk to the franchisees and I talk to their guys, they seem confident. There's a spring in their step.

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Christopher D. Glynn, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [41]

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Okay. So you did see the network's success in driving some incremental interest in the intelligent products for [MAC Tools]?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [42]

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Yes. I think what I'm saying is we're making -- we made adjustments around that, and we're launching new products. We're going to launch new products as we go forward, and we did see some improvement this quarter. The fourth quarter, as I said, was a specific activity that said -- I think I said we found after several quarters of driving intelligent diagnostics with the big data package, we're leaving a certain customer segment behind, so we went after them in the fourth quarter. We're not going after them anymore because we thought we sold them. We added them. We got them in the fold, back in the fold for the fourth quarter. Now they're doing special this time.

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Christopher D. Glynn, Oppenheimer & Co. Inc., Research Division - MD and Senior Analyst [43]

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Okay. And just a quick one on international. Is that just kind of stable, leaky or still getting your hands around what's going on with the international franchise?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [44]

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Our job is to fix things like that, okay? But -- so U.K. is getting better, but it's still a headache. You mention U.K. to me and the Tools Group, and I immediately get a migraine. But it is getting better. In the last few quarters, it gotten better so it hasn't been -- Australia is still a problem, but some of them have gotten better. So that particular business has gotten better. Still not as fast as the U.S. I do feel okay about it though I think our people are taking action. We're not just sitting still. We're acting on this. And so I believe we're on an upward trajectory. The time constant of that trajectory or the slope of that trajectory is another question.

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Operator [45]

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We'll take our next question from David Leiker with Baird.

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Joseph D. Vruwink, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Associate [46]

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This is Joe Vruwink for David. Did that mid-single-digit growth in U.S. Tools Group pretty well match rates of sellouts in the quarter?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [47]

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Yes. I think the sales off the van were a little bit lower, but generally, when you look over 3, 4, 5 quarters, it's about the same. What's going on the van is going off so no big difference.

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Joseph D. Vruwink, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Associate [48]

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And when you think -- I think you said it's 3 straight quarters now of kind of a nice return to growth in the U.S. tools business. When you think about the driver behind that, obviously on these quarterly calls where you talk a lot about new product, and I think you've had some compelling new product in the last 3 quarters to drive it. How much of the return to mid-single-digit would you squarely place on new product as opposed to maybe some other initiatives you might have tried out?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [49]

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I don't know. I mean I think new product is a thing which energizes the franchise. It's a kind of thing that gets people to get on the van. They buy the new product and they buy some other things as well. Now of course, that isn't necessarily true if it's a $10,000 toolbox or something, but generally if they're buying a, let's say, an FDX, a set of sockets with FDX, a Flank Drive Extra, you get them on the van, they end up leaving with something else usually. So I think there's that kind of thing. So I don't think -- we never really track how much of new product drives that. I do know though that it's a robust portion because they drive good margins. And any time we bring out a new project -- a new product, we get our value for them. And so you see the Tools Group nice margins. That's why we like the new product. And the cool thing about it is despite what people might think is that generally, the changing vehicle complexity is pretty strong. And the cool thing about this is -- I know there's some people would say that technicians aren't growing quickly. They're growing like 1%, but everywhere I go, people say I can't fill the jobs I have. So we're seeing -- I anticipate in the future some influx in new technicians. That's why we're spending all this time in schools. That's why we have 468 schools using Snap-on-certified -- Snap-on certifications. And we're in 2,500 schools because we're making those people that are going to eventually fill those slots of customers for life.

So I feel okay about that. I think the Tools Group is pretty good now. Now I would correct you on one thing. I did not say that it was robust growth for 3 quarters. I only said it was growth for 3 quarters. So some of that growth was a little slimmer than the mid-single digits, let's say, but it's a positive to see the movement upwards. There's a trajectory there that if you're a guy like me, you're pretty encouraged.

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Joseph D. Vruwink, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Associate [50]

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Yes. I meant to say a return to growth. Since you brought up the mechanic shortage we have in this country, one of the byproducts is if you are a mechanic, you're obviously getting very healthy earnings growth at the moment, good wage growth.

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [51]

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4.4%, BLS data.

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Joseph D. Vruwink, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Associate [52]

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So when you think about the improvement and the risk metrics of the asset book, obviously delinquency is moving around -- moving down. Maybe it flips back to the health of the mechanic customer. How much is not related to that, however, and maybe more conscious actions by Snap-on in the last 2 years to maybe skew the risk of the profile a bit differently than in that '15, '16 time frame?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [53]

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Well, I think there's both in there. It's hard for me to parse between those. I mean you'd be entitled to both of those ideas. Look, I think the thing is I mean people have talked about this, and I think somebody might reasonably ask me and say, well, is that the appropriate level of loss as well. I think people have worried that those losses were going to go through the roof. I think not. It's certainly -- we've been sitting at -- we've been dealing with that for a long time, and it has not gone through the roof. And by the way, does anybody think the finance company isn't a good business? It is. And so I do believe we feel pretty confident about the quality of those loans and getting better is a combination possibly of both things, I think.

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Joseph D. Vruwink, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Associate [54]

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And then one last question. For the international Tools Group business to ultimately only be down low single digits, was that better than you expected entering this quarter given the threat of Brexit and maybe the chaos that creates?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [55]

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The guys who run those businesses are listening to this call, so I'm not going to say that I was happy with being down. That's all I'll say about that, right?

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Operator [56]

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We'll take our next question from Curtis Nagle with Bank of America Merrill Lynch.

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Curtis Smyser Nagle, BofA Merrill Lynch, Research Division - VP [57]

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So apologies if I missed this point, but diagnostics in -- within RS&I, was that up or down? And then do you guys have any new platforms launching on X motorcycle?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [58]

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Yes. Look, diagnostics in the Tools Group was up. Diagnostics in the RS&I group can be split into 2 categories. One is sales to the Tools Group. And then it sells a variety of software and -- diagnostic-related software and handheld units outside the Tools Group -- outside the van distribution. So the sales through the Tools Group were up in the quarter for diagnostics. The sales outside of the software, particularly in the U.K., that software that was down quite a bit in this quarter, so that was the -- so the net of that was diagnostics inside RS&I was down some. But if you parse them, healthy to the Tools Group; outside, that channeled down, primarily because you had software and stuff that was rolling -- software end buyers that were rolling through Europe and it wasn't as strong. It wasn't strong.

Now in terms of introduction, it's already been announced that we're bringing out -- I was told not to talk about this on the call, but since you asked, we've already announced the introduction of something called the Triton, which is the replacement -- sort of like the 1 level down from the ZEUS and above the Apollo. You might -- so that kind of business, it's a replacement for what we call the MODIS. And that's been launched just recently, just in the second quarter. So we didn't have any sales at all in the first quarter, and we're still kind of rolling it out. When you roll these things out, you don't necessarily roll them out nationally. So that has the kind of thing that's happening now. But we're pretty -- I think talking to the franchisees over the weekend who had -- some of whom had seen it and had -- saw the presentation, they were pretty positive about it. It's a $3,500 to $4,000 product, good product. And we think it will be a good seller. It adds the addition of scoping. So it's aimed at mechanics who are working on projects that are high-value, and they can't afford to replace the component that they found is the problem and it's taken them 3 hours to remove. They can't afford to replace that program or take the 3 hours to remove it and replace it and find out it wasn't bad. Well, the Triton, different than the Apollo, will allow you to test that component before you take it out and say is it good or bad. So it avoids big mistakes and makes it much more efficient in the garage for those people who are doing those kinds of activities.

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Curtis Smyser Nagle, BofA Merrill Lynch, Research Division - VP [59]

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And I guess, yes, it's a new category for you guys, but I guess just thoughts on the potential to -- or how much do you think you'd grow motorcycle diagnostics? How big could that be for you?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [60]

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I don't know. We just -- we launched it in the first quarter. It was a good seller. We'll see. I think we feel pretty good though. I mean there are a lot of motorcycles around, a lot of motorcycle shops. And this is the only all makes -- pretty much all makes, all models diagnostics. So it's -- as I said in the calls, it's an underserved market. It was received with enthusiasm. I feel positive about it. But to mention it, it's a little early. We're not experienced enough in it yet. It's a good seller over in the quarter.

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Operator [61]

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And we'll take our final question from Ivan Feinseth with Tigress Financial Partners.

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Ivan Philip Feinseth, Tigress Financial Partners LLC, Research Division - Director of Research [62]

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Congratulations on another great quarter.

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [63]

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Thank you, Ivan.

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Ivan Philip Feinseth, Tigress Financial Partners LLC, Research Division - Director of Research [64]

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My question is with all the great torque tools that you make, you really don't talk about opportunities in just general OEM manufacturing and I think there's so many areas of manufacturing for pumps, compressors, pretty much every bolt needs to be torqued. How do you see the opportunity?

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [65]

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Yes. So we actually have a category called general industry. I did mention general industry as being up in the critical industries area, and that's where we use torque. And you're very right. We would use -- we do use it in general industry quite a bit.

I just -- they tend to be more one-off type applications where the airplanes, like I said, there are a lot of different situations where you can categorize them in bigger, bigger buckets. The -- I think the general industry tends to be a little bit more customized, so we tend not to mention it in these calls, but it's a big category for us. You're very right. And so we have a lot of opportunity there, and that's why we acquired Sturtevant Richmont. We acquired FASTORQ. We acquired Norbar to add to that capability of City of Industry, California. We're becoming -- we feel pretty good that in the industrial sector, one of the -- we were maybe the top torque business. We believe we may be the top torque business, and we're getting better because we're marching all of the capabilities. Like I talked about Sturtevant Richmont with their wireless capability together with the micro capabilities, the compact capabilities of our city administrator, our traditional strength, putting together that BLE CTech micro. That's the kind of thing we see in the future. And we believe that torque, because everybody's looking for more precision including in the automotive industry, driverless vehicles come -- precision is going to be really important because you don't want to be hitting the automatic park if you're out of -- if you're not in precise calibration.

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Ivan Philip Feinseth, Tigress Financial Partners LLC, Research Division - Director of Research [66]

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Yes, I am excited. I was -- like all the acquisitions you had made in the torque area, and I think there's a huge growth opportunity there. And I also am excited about the new motorcycle diagnostic system, that's why I look forward to hearing more about that.

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [67]

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Yes, that should be cool. We'll see. I can't believe we didn't do it earlier. It's one of those things...

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Ivan Philip Feinseth, Tigress Financial Partners LLC, Research Division - Director of Research [68]

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Yes, me too.

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [69]

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I keep saying is there's so many opportunities at Snap-on for growth. Every time we do something like this, we say to ourselves, "What happened? How is it we didn't think of that earlier?" So I (inaudible)

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Ivan Philip Feinseth, Tigress Financial Partners LLC, Research Division - Director of Research [70]

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Congratulations.

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Nicholas T. Pinchuk, Snap-on Incorporated - Chairman, CEO & President [71]

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Okay. Thank you very much.

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Aldo J. Pagliari, Snap-on Incorporated - Senior VP of Finance & CFO [72]

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Thanks, Ivan.

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Operator [73]

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And that concludes today's question-and-answer session. At this time, I'd like to turn the conference back to Sara Verbsky for any additional or closing remarks.

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Sara M. Verbsky, Snap-on Incorporated - VP of IR [74]

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Thank you all for joining us today. A replay of this call will be available shortly on snapon.com. As always, we appreciate your interest in Snap-on. Good day.

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Operator [75]

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And that does conclude today's conference. We thank you for your participation. You may now disconnect.